House passes major crypto legislation
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Rep. Glenn Thompson speaking in 2022. Photo: Kevin Dietsch/Getty
The House Wednesday passed the first major piece of legislation that would provide regulatory clarity to the cryptocurrency industry.
Why it matters: The industry has long complained that there was no way to operate in a way that conformed with U.S. regulations (other than to just not operate at all).
Driving the news: The Financial Innovation and Technology for the 21st Century Act, known on the Hill as FIT21, passed in the House Wednesday afternoon by a vote of 279-136, with 71 Democrats voting in favor.
- The Biden administration had issued a policy statement earlier Wednesday opposing passage of the bill, though it stopped short of expressing a veto threat.
Catch up fast: The bill is authored by Agriculture Committee chair Glenn Thompson (R, Pa.). It was first voted to the House floor in July 2023.
- The legislation provides a path for cryptocurrencies that have achieved sufficient decentralization to be traded and used by Americans.
- It also provides clarity for which tokens would be the responsibility of the U.S. Securities and Exchange Commission (SEC), and how such projects could attain regulated status with the agency.
Friction point: While the SEC has often said that it's happy to meet with crypto projects and find a way to regulate them, crypto companies say that efforts to do so have been fruitless.
- Case in point: The agency released a list of cryptocurrencies last year that had registered. In nearly every case, the registration occurred as part of legal action by the agency which ultimately shut down the company.
What they're saying: "The current regulatory framework for our securities and commodities market structure simply was not designed for and does not work for digital assets," the law firm Davis Polk wrote in a client update about the legislation, published on Monday.
The other side: FIT21 "would create new regulatory gaps and undermine decades of precedent regarding the oversight of investment contracts, putting investors and capital markets at immeasurable risk," SEC chair Gary Gensler said in a statement released Wednesday morning prior to the House vote.
- "The self-certification process contemplated by the bill risks investor protection not just in the crypto space; it could undermine the broader $100 trillion capital markets."
What we're watching: Congress has already sent the White House one piece of legislation, dealing with how firms should account for cryptocurrency when providing custodial services.
Our thought bubble: The White House will likely be looking at this vote as a temperature check among Democrats to determine whether or not it should veto that legislation or not.
What's next: The legislation goes to the Senate, which did just pass a much simpler piece of cryptocurrency-related legislation, but which also has Washington's best known crypto critic.
Crystal Kim provided additional reporting
